punditman says...Not quite. But the drunken Superpower Party is starting to peter out. The shindig is not quite over for the United States, but people are starting to leave the premises, the cops have been called several times and big fines have been levied on the partiers. When will this decades-old party end? Will the world turn away from the US dollar as the reserve currency? Not right away, according to Mike Whitney.
Here's the deal: American consumers are in debt and apparently have turned to saving once again. Unemployment is way up, and wages are going nowhere. This makes for less and less American consumer demand in world markets; that is what will eventually cause foreign governments and central banks to run away from the US dollar.
Then again, Americans are the quintessential consumers. Will they come back and live to party another day? When they do, it will be a different world. US "dollar hegemony" will no longer be used as a bully tactic backed up by military might. It's going to be an interesting future.
Dollar Hysteria
By MIKE WHITNEY
Robert Fisk lit the fuse with his hyperventilating narrative which appears in Tuesday's UK Independent which went viral overnight spreading to every musty corner of the Internet and sending gold skyrocketing to $1,026 per oz. Now every doomsday website in cyber-world has headlined Fisk's "shocker" and the blogs are clogged with the frenzied commentary of bunker-dwelling survivalists and goldbugs who're certain that the world as we know it is about to end.
From Fisk's article:
Reports of the dollar's demise are greatly exaggerated. The dollar may fall, but it won't crash. And, in the short-term, it's bound to strengthen as the equities market reenters the earth's gravitational field after a 6 month-long ride through outer-space. The relationship between falling stocks and a stronger buck is well established and, when the market corrects, the dollar will bounce back once again. Bet on it. So why all this bilge about Middle Eastern men huddled in "secret meetings" stroking their beards while plotting against the empire?
Isn't that the gist of Fisk's article?
Yes, the dollar will fall, (eventually) but not for the reasons that most people think. It's true that the surge in deficit spending has foreign dollar-holders worried. But they're more concerned about the Fed's quantitative easing (QE) program which adds to the money supply by purchasing mortgage-backed securities and US Treasuries. Bernanke is simply printing money and pouring it into the financial system to keep rigor mortis from setting in. Naturally, the Fed has had to quantify exactly how much money it intends to "create from thin air" to placate its creditors. And, it has. (The program is scheduled to end by the beginning of 2010) That said, China and Japan are still buying US Treasuries, which indicates they have not yet "jumped ship".
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Here's the deal: American consumers are in debt and apparently have turned to saving once again. Unemployment is way up, and wages are going nowhere. This makes for less and less American consumer demand in world markets; that is what will eventually cause foreign governments and central banks to run away from the US dollar.
Then again, Americans are the quintessential consumers. Will they come back and live to party another day? When they do, it will be a different world. US "dollar hegemony" will no longer be used as a bully tactic backed up by military might. It's going to be an interesting future.
Dollar Hysteria
By MIKE WHITNEY
Robert Fisk lit the fuse with his hyperventilating narrative which appears in Tuesday's UK Independent which went viral overnight spreading to every musty corner of the Internet and sending gold skyrocketing to $1,026 per oz. Now every doomsday website in cyber-world has headlined Fisk's "shocker" and the blogs are clogged with the frenzied commentary of bunker-dwelling survivalists and goldbugs who're certain that the world as we know it is about to end.
From Fisk's article:
"In the most profound financial change in recent Middle East history, Gulf Arabs are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar."International cabal"? C'mon, Fisk, you're better than that.
"Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars.
“The Americans, who are aware the meetings have taken place – although they have not discovered the details – are sure to fight this international cabal which will include hitherto loyal allies Japan and the Gulf Arabs. Against the background to these currency meetings, Sun Bigan, China's former special envoy to the Middle East, has warned there is a risk of deepening divisions between China and the US over influence and oil in the Middle East. ‘Bilateral quarrels and clashes are unavoidable,’ he told the Asia and Africa Review. ‘We cannot lower vigilance against hostility in the Middle East over energy interests and security.’”
Reports of the dollar's demise are greatly exaggerated. The dollar may fall, but it won't crash. And, in the short-term, it's bound to strengthen as the equities market reenters the earth's gravitational field after a 6 month-long ride through outer-space. The relationship between falling stocks and a stronger buck is well established and, when the market corrects, the dollar will bounce back once again. Bet on it. So why all this bilge about Middle Eastern men huddled in "secret meetings" stroking their beards while plotting against the empire?
Isn't that the gist of Fisk's article?
Yes, the dollar will fall, (eventually) but not for the reasons that most people think. It's true that the surge in deficit spending has foreign dollar-holders worried. But they're more concerned about the Fed's quantitative easing (QE) program which adds to the money supply by purchasing mortgage-backed securities and US Treasuries. Bernanke is simply printing money and pouring it into the financial system to keep rigor mortis from setting in. Naturally, the Fed has had to quantify exactly how much money it intends to "create from thin air" to placate its creditors. And, it has. (The program is scheduled to end by the beginning of 2010) That said, China and Japan are still buying US Treasuries, which indicates they have not yet "jumped ship".
Keep Reading...
